The Fleet Street Letter (Great Britain)-
I am currently working on the monthly piece that will focus on banks, bonds, property and sterling. It’s a detailed look into sterling’s recent fall compared to past big moves. I’ll look at why the banks have suffered and the outlook for the economy. I’m optimistic.
Every crisis is different. This one has been fairly muted for global stocks. It’s been more about bonds and sterling – and the Chinese Renminbi. Obviously UK and European equities have moved, but not by much in the great scheme of things. If it wasn’t for the Europeans, the FTSE 100 would have been the worst performing major stock market this year. Despite all of this, Europe has fared even worse.
The pound has seen far worse in its history. There was the blitz – it survived. Then there was 1974 when the UK was bailed out by the IMF. Then black (white) Wednesday when we came out of the ERM. All of these falls were far greater than what we have recently seen. In fact between 1981 and 1985, the pound more than halved against the dollar – a crisis that doesn’t even have a name other than it ended with the Bretton Woods agreement. And don’t forget the credit crisis in 2008 (-34%).
It does put this recent 12% year-to-date fall (versus the dollar) into perspective (24% since the mid 2014 high). On closer examination, it is the dollar that is highly priced. The pound is entering cheap territory and that will be extremely helpful in fighting off any impending economic slowdown…